Michael L. Klusaritz of Whitehall Township, former laboratory director at Hess, pleaded guilty in June to three counts of mail fraud and two counts of making false statements and claims to the Department of the Army.

After Klusaritz left Hess in 1995 to start his own company, McCoy took over as acting laboratory director and discovered that Klusaritz did not have equipment to do certain tests, fabricated results and billed customers anyway.

Between his job at Hess and his own firm, Phase II Laboratories in Catasauqua, Klusaritz billed customers more than $223,000 for work that, in many cases, was never done.

McCoy informed "a responsible individual" at Hess about Klusaritz' "fraudulent scheme" and was told to continue it, according to the U.S. Attorney's office in Philadelphia.

During McCoy's tenure, customers were billed over $27,000 for environmental testing that was never done or not done according to federal requirements.

The "responsible individual" has not been identified. Assistant U.S. Attorney Seth Weber said the investigation is continuing.

Hess conducted water, soil and sewage tests for customers so they could identify hazardous materials and comply with environmental laws. The company's customers included Air Products and Chemicals, Tobyhanna Army Depot and Carbon Products Operations Inc. of East Stroudsburg.

McCoy has agreed to plead guilty to one count of conspiracy to defraud the Department of the Army, the U.S. Environmental Protection Agency and the Pennsylvania Department of Environmental Protection; one count of making false statements to the Department of the Army and one count of mail fraud.